The best prescription for restoring consumers' trust

This summer has been tough for several organisations embroiled in public trust crises on the mainland. First, the powerful Ministry of Railways faced severe criticism after the Wenzhou train disaster and the disappointing debut of the Beijing-Shanghai high-speed service.

Then there is high-end furniture retail chain Da Vinci, which has been accused of misrepresenting the origin of its products by sending items to duty-free industrial parks. In this way, they acquired a seal on the invoice to make it look like the furniture had been imported, and thus could be sold to customers at vastly inflated prices.

Meanwhile, the popular Japanese-style noodle franchise Ajisen Ramen has been accused of misleading the public about how its noodle soup is prepared. More recently, the American fast-food chains KFC and Diary Queen have been accused of similar misleading advertising behaviour.

Even if some of the claims turn out to be inaccurate, the damage has already been done and customers have voted with their feet. Passenger numbers on the Beijing-Shanghai route dropped significantly after the crash. Ajisen's sales dived, and so did its shares on the Hong Kong stock exchange. Public criticism of KFC and Diary Queen has included the usual nationalistic voices against foreign multinational companies.

What has been disappointing is the companies' responses. The rail ministry first appeared elusive regarding the cause of the accident, trying to blame the weather; the rescue effort was criticised, as was its miserly offer of compensation to families of the victims. Da Vinci denied all wrongdoing and made no offer of compensation to customers. Ajisen Ramen buried its head in the sand, clearly hoping this unpleasant chapter would just fade away.

Perhaps executives at these companies should learn from a benchmark case of how to handle a crisis: Johnson & Johnson's reaction during the Tylenol crisis, even though the company was never at fault.

In 1982, seven people died mysteriously in Chicago. Authorities were alerted that the incidents could be linked to Johnson & Johnson's popular pain-reliever Tylenol, and it was later found that the Tylenol had been deliberately laced with cyanide.

After an investigation, Johnson & Johnson found that the Tylenol could not have been tampered with at its facilities, which was later confirmed by the police. But the news was already out, causing nationwide hysteria. Experts predicted the end of Tylenol.

What the company did next has become the benchmark by which all other business crisis responses are measured. As the adage goes, honesty is always the best policy. Johnson & Johnson was very forthcoming with police, honest with the press, and never attempted to avoid blame, even though it wasn't at fault. The company recalled 31 million bottles of Tylenol products from retailers' shelves, at a cost of over US$100 million, and offered to exchange all Tylenol that people had bought for its new Tylenol product.

The new product came in triple-sealed, tamper-resistant containers - along with discount coupons worth up to 25 per cent of the price. This series of actions won over the press first, which provided a great deal of publicity praising the company's actions. The concern for its customers during the crisis and its honesty made people believe that the reintroduced product would be safe.

Today, Tylenol is the best-selling pain relief drug in the world, and is widely available in China. But few consumers know that the 1982 incident almost crippled Johnson & Johnson. But, clearly, it was money well spent, as it paved the way for the company's remarkable comeback.

The principles demonstrated in the Tylenol case - honesty, transparency, forthrightness, putting customers' interests first and foremost, immediate damage control at all cost, and swift correctional measures - still hold true in today's business environment. Compared to Johnson & Johnson, the railways ministry and the companies currently in crisis have all failed miserably.

John Gong is associate professor at the Beijing-based University of International Business and Economics. johngong@ gmail.com